Microsoft may be dropping the price of the mid-range model of the Xbox 360, if a scan from an upcoming Kmart circular can be trusted. The price slashing to $299 may not just be an effort to kick start lagging Xbox 360, according to a "usually trustworthy source" of Ars Technica's. Communication passed on via their mole points to a new, 60GB hard drive-equipped model replacing the current 20GB model, a change that's alleged to be announced at E3.

A user on the High-Def Digest forums has posted a scan of what is claimed to be an upcoming Kmart…
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Ars Technica's source writes that the new hardware SKU will be launched "throughout July" and that the 20GB model will be officially discontinued. Consider this rumor, Microsoft-style, for now, but don't be surprised when whomever's piloting its E3 keynote mentions some extra storage breathing room.